Here is the third installment of the JNJ and MCD butterflies.
Here is how they are both doing after adjustments.

Happy Thanksgiving!

Hope you have a wonderful, happy, and well rested holiday!

Here is an update of the MCD and JNJ butterfly trades I showed you in my last video. Had to make an adjustment to each because of the strong down move in the market which also affected these stocks.

This is a video of myself looking for some option trades using one of my real money accounts. These trades are for example only and I may exit or change them at any time without telling anyone.

This is a sample of the types of videos that are produced for Option Genius members which anyone can join from our homepage.

There is a lot of volatility in the markets these last couple weeks. The DOW is up 100 points then down 124 the next. Then up again, then down. But overall the short term trend has been down.

But there is a sector that is doing well.

Fast Food. Well not exactly fast food, but whatever they call the sector that is lower than the sit down meal with the waiter.

Take a look at CMG – Chipotle.  And PNRA – Panera Bread.  and MCD – McDonalds.

All doing well, all at 52 week and all time highs.

Why? Well run businesses with pricing power. But also because they are growing by building more stores, mostly overseas.

All 3 of these are in my retirement accounts and will stay there for years to come.

I just exited the MCD butterfly I posted on the blog on 3/25.

I exited with a credit of 3.10.

I originally paid 3.11 for the trade so I lost .01 on 2 spreads or $2 plus commissions.

There is still 10 days left to expiration and MCD has not hit the expiration day break even yet, so according to the trading plan for the trade, I should have stayed in. But it feels like MCD will move higher and I wanted to get out before I started losing more money. For the 7 trading days I was in the trade, 5 days were up days.

There seems to be some resistance at 77 so the trade might still make money. Since I know that people have read it on the blog and might be following the trade, I decided to just exit here.

With the stock seemingly trading in a 73 – 77 range this one [...]

Just added a new trade in my personal portfolio today.

It’s a classic butterfly spread on MCD – McDonald’s.

The trade was Buy 2 April 70 puts, Sell 4 April 75 Puts, Buy 2 April 80 Puts for a debit of 3.11 per spread or a total cost of $622.

It’s a cheap trade that will make money if MCD stays between 73.12 and 76.92.

Here’s the graph:

The trade has a 48% probaility of profit at expiration. But I dont want to stay until expiration. I want to make 10-20% and get out within 2 weeks. This will happen if MCD stays where it is, or if the volatility in MCD options goes down.

With the end of the quarter coming up next week I am expecting the markets to go strong and higher into April. That will result in a drop in volatility and hopefully a quick profit.

If this trades needs an [...]

Great question from a member:

Last time with MCD position you opened another Butterfly to bring the Delta Neutral. Which I have been following and I thought it is very interesting. And maybe that’s the reason to raise me this question.
So my question is related to Iron Condor. Why do usually we close the

 position and open a new one when the price comes after us, instead

of adding some positions to bring the Delta Neutral.
For example: our last RUT we closed 640/650 and opened 660/670.

If we had keep 640/650 and add something to bring the Delta low levels

 again would have similar effect??
I know since we are just handling low quantity is more difficult to create this kind of sceneario, but assuming that the quantity would be greater, do you think that the mechanism of adding positions to bring the Delta low has the same effect as to roll up/down the position?
Just trying to get a better understand from the options world.
 
Tks a lot,
 
Paulo

Excellent question.
 
You are right, the same adjustment can be used in a condor. You can add options to lower the delta. That is one of the adjustments I look at. And it can work. But it depends on what is going on in the market. This month, the market was advancing regularly. Just about everyday it was going up. Adding some calls would only protect the deltas for a couple days and we would then have to do something else. That is why I moved the calls. It is a more drastic adjustment but I thought it was warranted in this environment. if you have a condor where the market makes a huge move upwards in a day and it might go back down, that is when you can add some calls to lower your deltas. Or if there is fear of a big move you can lower your deltas before the move so that no matter what happens you do not get hurt. You can then remove the bought options after the fear has passed.
 
Allen